designing economic incentives for antimicrobials ... · designing economic incentives for...

Designing Economic Incentives for Antimicrobials: Implementation in

the U.S. Context Hotel Monaco

700 F St NW, Washington, DC 20004 November 9, 2016

@dukemargolis

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D k I MARGOLIS CENTER U e for Health Policy

Designing Antimicrobial Economic Incentives for

Implementation in the U.S.

Gregory Daniel, PhD, MPH Deputy Director, Duke-Margolis Center for Health Policy

Clinical Professor, Fuqua School of Business

November 9, 2016


Current state of antimicrobial resistance (AMR)

• Antibacterial drug resistance: Growing global public health threat poised to worsen due to overuse, misuse and current market failures.

• Weak drug pipeline: Need investment and development of novel antimicrobials and other drugs to prevent or treat active infections • Difficult to develop drugs when microbes remove drug from cell or

undergo mutations that lead to resistance • Clinical development is challenging because of a lack of rapid

diagnostics and difficulty enrolling patients • Challenging market conditions due to low sales volumes & prices

due to effective stewardship and low-cost generic competition that limit clinical uses, which limit ROI • Efforts mostly focused on improving the R&D and regulatory

processes by lowering regulatory hurdles and by providing financial support.

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Inappropriate use of antibiotics drives resistance

• In 2009, antibiotic expenditures in the U.S. in

all healthcare settings totaled $10.7 billion:

$6.5 billion (61.5%) in the outpatient setting,

$3.6 billion (33.6%) in the inpatient setting and

$526.7 million (4.9%) in long-term care.

• One third of these antibiotic prescriptions is

inappropriate

• Reducing misuse and overuse of antimicrobials

will result in healthcare savings and slowing of

antibacterial drug resistance

• Antibacterial drug resistance reduces the

resources we have available to combat

infections

From Suda et al, J. Antimicrob. Chemother. (2013)

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There are very few antimicrobial drug candidates in the pipeline • According to Pew Charitable Trusts, there are currently 37 antibiotics in phase I-III testing (in

contrast, in 2015, there were 836 drugs in the pipeline for cancer)

– Few antibacterial compounds treat the most urgent unmet needs

– Based on published attrition rates, only 10-11 of the 37 antibacterial compounds will be

approved

• No new classes of antimicrobial are being brought to market

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From “Securing New Drugs for Future Generations: The Pipeline of !ntibiotics”, The Review on Antimicrobial Resistance. May 2015

No New Classes to Treat Gram Negative Bacilli For 4 Decades

From Joe Larsen at Duke-Margolis Antimicrobial Expert Workshop, July 21, 2016

Global efforts have identified essential steps

• Chatham House, the Royal Institute of International Affairs, an independent policy institute based in London, released a report on business models for antimicrobial development in October 2015

• DRIVE-AB, 16 public and 7 private partners from 12 countries, developing recommendations on: use and stewardship, economic models, and management and communication

• The Review on Antimicrobial Resistance is commissioned by, and reports to, the UK Prime Minister, but it operates autonomously of government control - a final report was released on May 19th, 2016

Convergence of principles:

• Provide grant funding to encourage R&D of antimicrobials

• Implement pull incentives that delink reimbursement from sales volume

• Coordinate globally on surveillance and development efforts

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Incentives for antimicrobials can support all stages in the development of priority antibiotics

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Developing U.S. approaches aligned with global proposals

• Part of comprehensive strategy to provide pull incentive in combination with other push incentives

• Public funding: Leveraged by global proposals and private payments for antibiotics to provide an adequate reward for drug development for high priority antibiotics at lowest feasible public cost • Obtaining advanced commitment to U.S. appropriations in a tight budget

environment is difficult

Rapid access to funds upon approval for drug addressing high-priority• needs: • Manufacturer’s access to funds can be tied to the value of the drug • Front-loaded payments, but occur over time to promote value and access

goals

• Movement from fee-for-service (FFS), volume-based reimbursement to value-based reimbursement: U.S. is moving toward episode- and person-level alternative payments tied to value of care rather than volume

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Core principles for antimicrobial incentives

Innovation

• Enable small and large developers to succeed

• Keep current developers in antimicrobial space

• Incentivize developers to return to the space

Sustainability

• Incentives are developed to be sustainable over time

• Strive for a sustainable business model that can be achieved through enhanced predictability

• Allows for flexibility of reward over time as development goals met

Access

• Support stewardship and appropriate use

• Integration and coordination with global efforts (stewardship and access for low income country)

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Duke-Margolis Center’s approach

Goals:

• ϝϡϫΊ ϡϓϓ ϓϡϡ ϓϝ ϡϒϡϡ reforms, that incentivize development, support stewardship and value, and can be feasibly implemented in the U.S.

• Outline a path for implementation within the U.S. healthcare system

Strategy: • Engage broad-based stakeholder and expert group to identify and develop

promising models

• Examine outputs from DRIVE-AB, AMR Review Team, other global and U.S proposals

• Develop policy recommendations on the most viable economic incentives that could be implemented in U.S.

• Disseminate research findings through several public outlets, including publications and presentations at relevant meetings.

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Duke-Margolis Antimicrobial Advisory Group

Private Payers: • Aetna • ExpressScripts • Intermountain

Healthcare • Kaiser Permanente

Public Payers: • Centers for Medicare

and Medicaid Services

Patient Advocate: • Foundation to

Combat Antimicrobial Resistance

Small Manufacturers: • Achaogen, Inc • Melinta Therapeutics • Spero Therapeutics

Large Manufacturers: • AstraZeneca • GlaxoSmithKline • The Medicines

Company

Societies: • Infectious Diseases

Society of America

U.S. Government: • U.S. Food and Drug Administration • Centers for Disease Control and

Prevention • Biomedical Advanced Research and

Development Authority

International organizations: • The Review on Antimicrobial Resistance • DRIVE-AB • Center for Disease Dynamics,

Economics & Policy

Academics: • Boston University School of Law • Duke University Schools of Medicine

and Business • Harvard School of Public Health

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Overview of today’s sessions

Session I: Transferable exclusivity voucher

Session II: Market Entry Reward

Session III: Value-based Reimbursement Contracts

• Each session will open with an overview of the proposal

• Opening speaker will be followed by a reaction panel

• We encourage all audience members to participate in the discussion of these models

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@dukemargolis


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Session I Transferable Exclusivity Voucher

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Transferable Exclusivity Vouchers

for the Antimicrobial Market

Amanda Jezek Vice President, Public Policy and Government Relations

Infectious Diseases Society of America

November 9, 2016

Agenda

• Concept of transferable exclusivity vouchers

• Pros and Cons

• Addressing potential challenges

• Political environment

• Policy context

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Transferable Exclusivity Vouchers:

Basic Concept

• A company that receives FDA approval for a new antibiotic

would obtain a voucher to extend the exclusivity period of

another drug.

• A company that earns the voucher could sell it to another

company.

• Many details to consider:

– Which antibiotics would be eligible?

– Length of extended exclusivity?

– Drugs on which voucher can be used?

– Stewardship?

2003: Duke University professor and researcher:

Henry Grabowski

Transferable Market Exclusivity: a pull-based

incentive that affords companies a defined period of

market exclusivity that can be applied to any

compound, thus facilitating R&D spending on a

different “socially desirable but unprofitable

medicine”

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IDSA: 2004

Critical Priority: Establishment of a “wild-card

patent extension linked to R&D for antibiotics to

treat targeted pathogens.

• Two-year patent extension

• New antibiotic that treats a targeted pathogen

• Require company to commit 10-20% of

profits derived from the patent extension to

additional targeted antibiotic R&D

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PCAST: 2014

Reward successful developer of an important antibiotic

with a ‘tradable voucher’ that provides a short extension to

the patent life or market exclusivity period of any drug.

The developer could sell the voucher to another company

with a blockbuster drug whose patent is soon to expire.

• Example: For a mature blockbuster drug with $4 billion in annual sales, a

three‐month extension would yield $1 billion in additional sales –

corresponding to profits of $800 million

• Would delay generics. “Why should patients taking a statin drug (or their insurers) bear the financial burden of incentivizing antibiotic

development?”

• Would leave innovation decisions up to the free market.

• Would not require direct appropriation from the Federal discretionary

budget, although a portion of the cost would be borne by CMS as a payer.

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Johnson & Johnson Testimony: 2014 Energy and

Commerce Committee Hearing Transferable Market Exclusivity (TME):

• Successful examples of extended exclusivity stimulating product development:

• Orphan drugs

• Pediatric exclusivity

• Decouples the investment toward development of an antibiotic from the market

success of the antibiotic

• Guardrails could be incorporated into a TME model to ensure, for example, that a

TME period or voucher cannot be applied to on-market pharmaceutical products

for which fewer than four years of patent life remain.

• Support the inclusion of TME in a larger package of policy incentives for

antibiotic R&D

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2015: 21st Century Cures Act

(discussion draft only)

Conveyed Exclusivity (proposed by Reps. John Shimkus (R-IL) and Gene Green (D-TX):

• Option to convey up to 12 months of the 5-year extension of exclusivity provided to Qualified Infectious Diseases Products (QIDPs) by the GAIN Act to a different (non-QIDP) drug

• Would require companies electing this option to donate:

– 5% of profits attributable to the conveyed exclusivity to the National Institutes of Health to fund antimicrobial resistance research

– 5% of profits attributable to the conveyed exclusivity to patient assistance programs that include the disease for which the drug receiving the conveyed exclusivity is intended to treat

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Transferable Exclusivity Vouchers: Pros

• Does not require upfront government funding or

annual congressional action

• De-linked from the sales or use of antibiotics

• Potentially powerful incentive for companies

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Transferable Exclusivity Vouchers: Drawbacks

and Potential Solutions

Challenges Potential Solutions

Increases costs in other areas of healthcare Cap voucher (in value or duration)

Can negatively affect generic market • Voucher will only be awarded to new drugs (not

applicable for previously approved drugs)

• Company that will be using the voucher must

declare which drug the voucher will be used on

at least 4 years prior to exclusivity expiration

Does not encourage stewardship Link quality reporting requirements (e.g., efficacy,

length of hospital stay) to receipt of voucher

Could be poorly targeted to needed Limit eligibility to drugs that meet criteria set by

antibiotics public/private partnership group, which will identify

unmet need based on periodic reviews of infection

rate, resistance, and the drug pipeline

Sale of drug would still be FFS, but providing Drug provided at cost of production with penalty for

drugs for free would undermine stewardship improper use

Ten years after implementation of voucher program, the GAO could conduct a study to determine the effectiveness of the vouchers and whether the voucher program should continue

Source: Duke Margolis Center for Health Policy

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Another approach

The federal government could sell exclusivity vouchers and use the

proceeds to finance market entry rewards.

• Financing mechanism for market entry rewards that does not

require up front government funding or annual congressional

action

• As part of a “delinkage” approach, market entry rewards could

be linked to more robust stewardship policies

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Political Environment: Momentum for Addressing

Antibiotic Resistance, New Antibiotics

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Political Environment: Public Outcry on Drug Costs

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Policy Context

CARB National Action Plan • Increased BARDA, NIAID, DoD efforts

• CARB-X: Biopharmaceutical Accelerator

• Antibacterial Resistance Leadership Group

• FDA exploring new approaches

• Stewardship requirements in hospitals and LTCs

21st Century Cures Act

• Limited Population Antibacterial Drug

(LPAD) Approval Pathway

• Breakpoints

• Passed House 2015, Senate HELP Committee

2016; working toward final deal

2017

• PDUFA legislation will provide another

opportunity to move antibiotics incentives

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Final thoughts: Multiple Push and Pull

Incentives are Needed

Transferable exclusivity vouchers may be part of the solution

Transferable Exclusivity Vouchers

BARDA, NIAID,

DoD funding

Other incentives?

Tax Credits

Market Entry Rewards

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Final Thoughts: Comprehensive Approach is

Needed

New Antibiotics & Diagnostics

Infectious Diseases

Workforce

Infection Control and Prevention

Surveillance & Data

Collection

Stewardship

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(

Premature Death Life-altering Disability

www.AntibioticsNow.org 31

New Antibiotics: Inaction is Not an Option

Rebecca Lohsen (17 yr)--Dead

Premature Death Life-Altering Disability

Tom Dukes: colostomy, lost 8” colon

Mariana Bridi da Costa (22 yr)--Dead

Carlos Don 12 yr)--Dead

Ricky Lannetti (21 yr)--Dead

Addie Rerecich, 11yo Double lung transplant

Stroke, nearly blind $6 million hospital bill

Thank you

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@dukemargolis


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Session II Market Entry Reward

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Kevin Outterson Boston University

The Antibiotic Tripod Access without sustainable use will speed resistance

Sustainable use constrains access and undermines innovation

Innovation without access

is unjust, and without

sustainable use is wasteful

Hoffman, Outterson et al. JLME 2015

Convergence of principles • Need for both “push” and “pull” mechanisms

• Delinkage (i.e., revenues delinked from volumes sold)

• Access and sustainable use are integral

• Global collaboration and financing necessary

Ͻϡ ΰϳ αίΰε !ϓϡΊ engage in initiatives and proposals to implement a new business model to bring new antibiotics to the market, including models in which investment costs or revenues are de-linked from sales ϡ

US Incentives

BARDA & NIAID

Orphan Drug?

NIAID CARB-X

Chatham House, Towards a New Global Business Model for Antibiotics: Delinking Revenues from Sales Oct. 2015


1. Structure 2. Magnitude

3. Adjustments 4. Other rules

5. Funding

Delinkage ModelsMarket Entry Rewards

Structure •Guaranteed, unambiguous payment

upon FDA registration •Size of payment varies with TPP •Payment spread over 5 years •No profits from sales volume •Conditions for stewardship

& global access




5. Funding

Magnitude

Taking the smallest estimate, roughly adjusted to 2017 dollars = $1b total or a base payment of $200m a year paid for five consecutive years after FDA registration.




5. Funding

Adjustments

Also consider a much smaller but long-term “market access” payment to support warm mfg base

Adjustments •Target Product Profile (previous slide) •Clawback for federal grants & tax credits

(assumed in ERG) •Global coordination




5. Funding

Other Rules •Payment rules must be guaranteed when R&D decisions are made (i.e., grandfathered for > decade)

•“On ramp” process during Phase 2

•Payments cease if drug withdrawn from market or key conditions violated

•Generics may need special rules




5. Funding

Funding

1. Federal $

2. Pay or play

3. User fees

4. Transferable exclusivity vouchers (with guardrails)

2 – AMR Review; 3- Hollis & Ahmed NEJM 2013; 4- Outterson & McDonnell, Health Affairs May 2016

Tweeting antibiotics R&D @koutterson

Research papers at Google Scholar & SSRN

Kevin Outterson Boston University




@dukemargolis


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Session III Value-Based Reimbursement

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Path to Sustainability with Value-Based Reimbursement

for Antimicrobials

Gregory Daniel, PhD, MPH

Deputy Director, Duke-Margolis Center for Health Policy

Clinical Professor, Fuqua School of Business

November 9, 2016

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Increasing the value of health care delivery

• As health care expenditures rise, more emphasis is on value and quality

• Providers and payers implementing alternative payment models (APMs) • Shift from volume and intensity to patient-level payments that enable

more flexibility in how services are provided • Higher payments for better measured results and lower overall costs • Provide support for care coordination and innovative care delivery • Create new financial accountability for providers… Will affect incentives for

use of costly therapies – particularly those with low impact on outcomes

• Challenging for health care providers • Steep learning curves in shifting to new payment structures, requiring new

patient care capabilities and capacities to bear financial risk • Increasingly complex drug and device pipeline with high prices and traditional FFS payments that aren’t aligned with shift

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Framework for Alternative Payment Models (APMs)

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The framework is a step toward the goal of better care, smarter spending, and healthier people…

- for payment reform capable of supporting the delivery of person-centered care

- for generating evidence about what works and lessons learned

The framework situates existing and potential APMs into a set of categories.

https://hcp-lan.org/groups/apm-fpt/apm-framework/

Path to value-based reimbursement

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Phased-in approach to value-based reimbursement

• The FFS payment scheme does not align payers, providers, and drug manufacturers to use antibiotics appropriately

• Market entry reward provides quick access to funding but has built in incentives to transition to population-based payment

• Population-based payment (including PMPM or per-episode bundled payment tied to results) separates reimbursement from volume of drug used

Payment would be dependent on efficacy of drug and availability when appropriate

Aligning payments for high-priority antibiotics with effective use in the covered population, rather than volume of sales, would encourage all parties to work together to use them appropriately

Phase II:

Per member per month (PMPM)

value-based contracts between

payers and manufacturers

Phase I:

Market Entry Reward

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--

Phased-in approach to value-based reimbursement (cont.)

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• Upon market entry, the manufacturer will receive a yearly payment, which would continue over 4-5 years and would be front-loaded, so the payment gets smaller over time.

• To continue receiving the payment, manufacturers would have to demonstrate that an increasing share of their payments for the drug are based on alternative, population-based payment contracts with the payers.

• The amount of payment will reflect the value (with appropriate accessibility) that the drug brings to the population of insured patients, rather than the volume used.

Over time, manufacturers form non volume based contracts

for entry reward

YEAR 1 YEAR 2 YEAR 4 YEAR 3 YEAR 5+

Phased-in approach to value-based reimbursement (cont.)

Market entry reward from Antibiotic Innovation Fund

TIME

100%

100%25%

75%

60%

40%

- Market entry reward will be delivered based on specific eligibility criteria set by an independent organization

- Recipients of the reward would be required to comply with established guidelines to ensure stewardship and appropriate use of the drug, while also being allowed to collect payments from insurers for access to the drug.

- Manufacturers will collect data on outcomes to inform future value-based reimbursement agreements

- To continue receiving the market entry reward, manufacturers would have to demonstrate that an increasing share of their revenue for the drug is based on alternative, population-based payment contracts with the payers – not payments that are substantially based on volume of use.

- Some or all of the drug payments could be in the form of a per-member per-month (PMPM) fee to the manufacturer for access to the drug.

- Payments to manufacturers will be front-loaded, so they will receive a smaller reward while they start building non-volume-based contracts with payers

- Manufacturers would be required to support the collection of performance data demonstrating stewardship and appropriate use, as well as impact on patient outcomes and continued effectiveness of the antimicrobial.

- The amount of payment will be determined via contracts with payers, reflecting the value (with appropriate accessibility) that the drug brings to the population of insured patients, rather than the volume used.

- Payers negotiate with providers to generate savings through appropriate use and providing the right drug for the right infection

Per member per month (PMPM) from payers to manufacturers

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